Saturday, March 14, 2015

Are Lindens Really Worth Anything in Second Life?


 All money is a matter of belief.

Adam Smith

  

          For the purposes of this story. I’m talking about the Linden currency in Second Life (SL) and not the Linden Lab (LL) Real Life (RL) staff who purportedly have “Linden” as their avatar’s surname.  (I say purportedly because I’ve never met one Linden in all my years inworld.  But, that’s another story for another time!)

          Today, I want to talk about Lindens as a currency, a store of value, in SL and if they’re really worth anything.

          Lindens are a centralized, virtual currency.

          In other words, LL holds all the cards.

          Unlike some virtual currencies, such as World of Warcraft, LL does permit Lindens to be exchanged for RL currency. 

          Now, LL doesn’t like that classification because of the US Treasury Department’s interpretive guidance on virtual currencies released in March 2013 by its Financial Crimes Enforcement Network (FinCEN).   (I’ll bet you don’t read too many articles about SL that reference US government websites, huh? Significant Other sighs nearby.)

          These regulations deem that LL is now a Money Services Business (MSB) just like Citigroup and Deutsche Bank.  Who knew?

          LL now terms Lindens as “transferable licenses” under its current Terms of Service (ToS).  I suspect they’re trying to avoid the onerous reporting and compliance rules that accompany being an MSB.       

          Apparently, FinCEN trumps LL and they make the call.  (Somebody wins one with LL!  I’m impressed that it took the full weight and majesty of the Feds to do this.)

          So, going back to my original question, “What are Lindens really worth anything in SL?”

         
For the ordinary resident, Lindens are a way to make small purchases (OK, maybe some aren’t so small, I’m trying to make a point here.) and to be able to walk around with some money in one’s pocket Lindens are useful and are as valuable as the individual holding them thinks they are.

          For the financial speculator with dreams of grandeur inworld that leech over into RL, I’d really keep my expectations in check.

          Remember, Lindens are centralized, (Don’t believe me?  Remember that LL has had a fixed exchange rate for like forever!)  anytime things get out of whack with the SL economy and money supply (And they do, even in RL, just ask Alan Greenspan.) LL will do whatever it wants with the supply of Lindens and the holders have no recourse.  (Sure, there’s probably some schnook in RL who’ll spend real money to get his virtual money back.  All I have to say to him is good luck!)

          Virtual currencies like Lindens are really only intended for gameplay.  Given the recent interest in them by various Treasury authorities around the world, I suspect that game developers will become more restrictive on how they’re used and can interface with RL. 

          Now, I do believe that sooner or later, a viable virtual economy will arise somewhere in the Metaverse. 

          The rise of true digital currencies like Bitcoin will see to that.  Lindens and their ilk will be fondly remembered for what they are, “play money.”

          Interestingly, while researching this story, I went back to the Bitcoin exchanges I’d visited in my earlier Bitcoin story only to find them all closed.  Further, any other references to Bitcoins that I could find just led to dead ends.  Currency exchanges only traded in Lindens for RL currencies. 
          Where are the bitcoins?


          Maybe there’s another story here! 

          Enough of the dismal science for now, although, I’ll return to this topic from time to time as RL events dictate.  (Significant Other wonders why I couldn’t just stay with the nudist resport.)

          As always, I’m grateful to all inworld for their kindness and time in stopping to talk with a stranger who was passing through their lives

My Twitter handle is @webspelunker.  Please feel free to follow me and I’d be happy to follow you.

I can be found on Google+ as webspelunker Ghostraven.

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On Skype I’m webspelunker Ghostraven.

I welcome feedback from readers, please either comment on my blog or e-mail me at webspelunker@gmail.com . 

          If you would like to read about my other adventures in Second Life
please click here.

          Open roads and kind fires!

                                             

 

2 comments:

Caroline Resident said...

Webby,

I strongly disagree on your take that Lindens are just play money.

First off you can exchange Lindens at any given time into US Money. This exchange is not limited (for example to amounts you previously bought) but also is applicable to amounts you actually made within the SL economy!

When there is a true economy, with real markets then the currency used in said economy is far more than just play money.

I am exchanging myself something between 100.000 and 200.000 Linden per month into real US Cash. So trust me, it is much more than playing with habbo credits :-)

Yours

Caroline Resident

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